East West Bancorp Reports 61% Growth in 1999 Earnings Per Share; Increased Margins, Growth in Assets and Further Efficiency Gains Drive Strong Performance.Business Editors SAN MARINO San Marino, city, United States San Marino (săn mərē`nō), residential city (1990 pop. 12,959), Los Angeles co., S Calif.; inc. 1913. Of interest is the Huntington Library, Art Collections, and Botanical Gardens. , Calif.--(BUSINESS WIRE)--Jan. 13, 2000 ROE A fictitious surname used for an unknown or anonymous person or for a hypothetical person in an illustration. A lawsuit is generally named for the persons who are parties to it. Climbs to 21.26% Growth Anticipated to Continue in 2000 East West Bancorp, Inc. (Nasdaq:EWBC) parent company of East West Bank, one of the nation's best performing community banks and a leading financial institution focused on the Chinese-American and other niche markets A niche market also known as a target market is a focused, targetable portion (subset) of a market sector. By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. , today announced record financial results for the year ended December December: see month. 31, 1999. Management attributed the excellent results to significant growth in the net interest margin, healthy gains in the commercial lending portfolio and continued improvements in the efficiency ratio. Net income for the fourth quarter of 1999 climbed to a record $7.9 million and diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of rose to a record $0.35, 30% above the EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. reported in 1998. For the full year 1999, net income was $28.0 million, while diluted earnings per share increased to $1.22, 61% greater than 1998 EPS. Return on average assets for the fourth quarter and full year were 1.49% and 1.35%, respectively, compared to 1.30% and 1.00% for the same periods in 1998. Return on average equity improved to 21.26% and 18.96% for the quarter and full year, versus 17.62% and 12.83% in 1998. Dominic Dominic hound who travels widely. [Children’s Lit.: Dominic] See : Dogs Ng, Chairman, President and Chief Executive Officer, commented on the record results, "1999 was a watershed watershed, elevation or divide separating the catchment area, or drainage basin, of one river system or group of river systems from another system or group of systems. The term is also often used synonymously with drainage basin. year for East West, and the results of our first year as a public company validated val·i·date tr.v. val·i·dat·ed, val·i·dat·ing, val·i·dates 1. To declare or make legally valid. 2. To mark with an indication of official sanction. 3. the soundness of our expansion strategy. During the year we generated record earnings, maintained our solid asset quality while we increased the diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. of our commercial loan portfolio and completed the accretive acquisition Accretive Acquisition An acquisition that will increase the acquiring company's EPS. Notes: As they are expected to increase the acquiring company's future earnings, these acquisitions tend to be favorable for the company's market price. of First Central Bank. These accomplishments all resulted from the successful execution of our strategy of serving as the financial bridge to the state's vibrant middle market, and assisting a broad range of commercial enterprises to achieve financial success in a healthy and expanding California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). economy. We believe that the achievements of the fourth quarter allow us to enter 2000 well positioned to continue to generate solid earnings growth and returns." Operating Results East West reported net income for the fourth quarter of 1999 of $7.9 million, a 21% increase over the $6.5 million reported in the prior year period. Diluted earnings per share rose by 30% to $0.35, versus $0.27 for the fourth quarter of 1998. The record financial performance was the result of healthy gains in the commercial and real estate loan portfolio, significant net interest margin expansion and further gains in the bank's efficiency ratio. Ng commented on the results for the fourth quarter, "At the beginning of 1999, we pledged pledge n. 1. A solemn binding promise to do, give, or refrain from doing something: signed a pledge never to reveal the secret; a pledge of money to a charity. 2. a. to our shareholders to execute To run a program, which causes the computer to carry out its instructions. See executable code, instruction and EXE file. execute - execution on a number of key strategies, including driving earnings growth through increasing our commercial lending portfolio, maintaining our solid asset quality and leveraging the well developed service platform and infrastructure at East West to achieve further efficiency gains. Our financial results for the fourth quarter and full year of 1999 powerfully demonstrate our fulfillment ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. of these promises." East West generated healthy growth in assets, loans and deposits as it continued to execute on its strategy of becoming the financial bridge to California's middle market. Total average assets climbed to $2.1 billion for the fourth quarter, a 6% growth, driven primarily by a 35% increase in average loans, which rose to $1.5 billion for the quarter. Multifamily, commercial real estate and commercial business loans accounted for the majority of growth in both assets and loans. Due to the continued shift towards a more commercial lending portfolio, the redeployment re·de·ploy tr.v. re·de·ployed, re·de·ploy·ing, re·de·ploys 1. To move (military forces) from one combat zone to another. 2. of other earning assets Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin into loans and an increase in loan rates, the average yield on earning assets grew to 7.83%, a 6% improvement over the 7.38% yield for the fourth quarter of last year. Deposit growth and diversification continued during the quarter, with the bank reporting a 16% increase in total average deposits to $1.5 billion. Reflecting the bank's goal of reducing the percentage of time deposits in the total deposit composition, non-interest-bearing deposits increased by 43%, or $40.0 million from the prior year period, to $133.6 million. Average other non-time deposits grew by a total of 8% to $362.7 million. The average cost of deposits for the final quarter of 1999 declined by 8% to 3.60%, primarily as a result of the shift in deposit composition. Due to the growth in the loan portfolio, a higher overall yield on average earning assets and a lower average cost of deposits, the net interest income for the fourth quarter climbed by 22% to $19.7 million, or 3.91% of average earning assets, compared to $16.2 million, or 3.36% of earnings assets, for the prior year period. Management expects that the net interest margin, which increased by 16% in the fourth quarter, to moderate in its growth, with a 2000 target of slightly over 4%. Provision for loan losses for the quarter ended December 31, 1999 equaled $1.4 million, versus $767 thousand booked in 1998. The increase in the provision reflects management's commitment to maintain prudent levels of reserve coverage and enhance the allowance growth in commercial loans. Credit quality for the year remained solid. Non-interest income in the fourth quarter equaled $3.6 million, 38% greater than the $2.6 million reported in the prior year period. Excluding gain on securities, non-interest income rose 14% to $3.0 million compared to $2.6 million for the fourth quarter of 1998. Higher branch fee income and a moderate increase in letters of credit fees accounted for the majority of the increase in non-interest income. Non-interest expense rose by 27%, or $2.2 million, in the fourth quarter of 1999 to $10.5 million. Excluding amortization of intangibles Property that is a "right" such as a patent, Copyright, or trademark, or one that is lacking physical existence, such as good will. and investments in affordable housing partnerships, non-interest expense increased by 18% to $9.1 million. This increase was due primarily to the bank's continuing growth, including the addition of First Central Bank operations. The efficiency ratio for the fourth quarter equaled 39.17%, 5% lower than the 41.28% reported for the fourth quarter of 1998. The improvement in the efficiency ratio reflects the synergies realized during the integration of First Central, as well as general efficiencies generated from the bank's operating infrastructure and asset redeployment Asset Redeployment The strategic relocation of company assets in order to increase profitability. Notes: By redeploying assets, a company is restructuring itself in order to become more efficient and profitable. . While operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. are expected to increase as East West continues its organic expansion and completes the acquisition of American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of International Bank, management anticipates that the bank's efficiency ratio will remain within its target levels, which the bank has set at 40% to 43%. Net income totaled $28.0 million for the full year 1999, 55% greater than the $18.0 million generated in 1998. Diluted earnings per share equaled $1.22, a 61% increase over the $0.76 per share reported in the prior year. Return on average assets for 1999 grew to 1.35% and return on average equity to 18.96%, compared to 1.00% and 12.83% in 1998. Total average loans increased to $1.3 billion for 1999, a 30% increase over 1998. Multifamily, commercial real estate, commercial business and construction loans accounted for the majority of the increase. The average yield on earning assets for the year rose to 7.46%, compared to 7.33% for 1998, due primarily to the growth in commercial loans. Average total deposits for the year were $1.4 billion, 12% above the average for 1998. Non-interest bearing deposits grew by 47% to $116.1 million for the year, reflecting the integration of First Central Bank's deposit base as well as organic growth in non-time deposits. Average other non-time deposits increased by 11% to $355.9 million. As a result of the growth in loans and yield on assets and a lower cost of deposits, the bank generated a 29% increase in net interest income for the twelve months ended December 31, 1999. Net interest income was $71.9 million, or 3.62% of average earning assets, versus $55.7 million, or 3.22% of earnings assets for 1998. Provision for loan losses for the full year increased by 2% to $5.4 million, primarily as a result of the growth in the bank's loan portfolio. Non-interest income for 1999 of $14.7 million was 47% above the amount reported for the prior year. Higher letters of credit and branch fees contributed to the growth, as did gains on sales of securities, affordable housing partnerships and a branch office. Excluding these gains on sale, non-interest income increased by 27% to $11.0 million. Non-interest expense equaled $39.5 million, 21% greater than the level for 1998. Excluding the amortization of intangibles and affordable housing partnerships, non-interest expense was $34.9 million, a 15% increase over the $30.4 million reported for the prior year. Compensation, occupancy Gaining or having physical possession of real property subject to, or in the absence of, legal right or title. In a fire insurance policy, for example, the term occupancy , data processing data processing or information processing, operations (e.g., handling, merging, sorting, and computing) performed upon data in accordance with strictly defined procedures, such as recording and summarizing the financial transactions of a and other operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. accounted for the majority of this increase, reflecting the general growth in the bank's operations and the addition of First Central Bank. The efficiency ratio, excluding amortization of intangibles and investments in affordable housing partnerships, for the twelve months of 1999 equaled 40.56%, 13% better than the 46.52% for 1998. Asset Quality As of December 31, 1999, nonperforming assets Nonperforming asset An asset that is not effectively producing income, such as an overdue loan. nonperforming asset An asset that produces no income. totaled $16.2 million, or 0.75% of total assets, down 24% from the $20.4 million, or 0.99% of total assets, at December 31, 1998. The decrease in the level of nonperforming assets is primarily due to a reduction in other real estate owned Real Estate Owned Property owned by a lender - usually a bank - after an unsuccessful sale at a foreclosure auction. This is common because most of the properties up for sale at these auctions are worth less than the total amount owed to the bank: the minimum bid in most . Nonaccrual loans equaled $10.9 million at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. , or 0.73% of total loans, compared to $9.8 million, or 0.87% of total loans for the prior year. Management believes that its focus on sound underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. and the strong operating and financial fundamentals of its customer base accounts for the solid performance of its asset quality. The allowance for loan losses as of year end grew to $20.8 million, or 1.38% of loans, and 190.65% of nonaccrual loans, compared to $16.5 million, or 1.47% of loans and 166.88% of nonaccrual loans, for the prior year. For the three and twelve month periods ended December 31, 1999, net charge-offs equaled 0.08% and 0.17% of total loans, respectively. Net charge-offs for the three and twelve month periods of 1998 were 0.01% and 0.11%, respectively. Acquisitions The acquisition of American International Bank progressed on schedule during the fourth quarter, and is expected to close in the next few days. Management expects the transaction to be accretive to earnings per share during 2000, enhance the bank's deposit franchise among Chinese American Chinese Americans (Chinese language: 美籍華人 or 華裔美國人) are Americans of Chinese descent. Chinese Americans constitute one group of Overseas Chinese and are a subgroup of Asian Americans. customers and provide East West with the opportunity to offer acquired customers its extensive product menu. As previously stated by management, the bank remains committed to being the leading acquirer of community institutions that fit into its acquisition profile, with an emphasis on becoming the dominant consolidator of institutions serving the Chinese American community. All acquisitions are expected to be accretive to EPS in the first full year of operations, and further strengthen East West's franchise value and market presence. Capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. The company remained "well capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. " under every regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. category, with a Tier 1 risk-based capital ratio Risk-based capital ratio Bank requirement that there be a minimum ratio of estimated total capital to estimated risk-weighted asset. of 9.33%, a total risk-based ratio of 10.58% and a Tier 1 leverage ratio of 7.31%. Management believes that its capital base is sufficient to support continued growth for the near future. Forward Looking Statements This release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which are included in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 and accordingly, the cautionary statements contained in East West Bancorp's Annual Report on form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 1998 (See Item I - Business, and Item 6 - Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial of Plan of Operation), and other filings with the Securities and Exchange Commission are incorporated herein by reference. These factors include, but are not limited to: the effect of interest rate and currency exchange fluctuations; competition in the financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. market for both deposits and loans; EWBC's ability to efficiently incorporate acquisitions into its operations; the ability of EWBC and its subsidiaries to increase its customer base; and regional and general economic conditions. Actual results and performance in future periods may be materially different from any future results or performance suggested by the forward-looking statements in this release. Such forward-looking statements speak only as of the date of this release. East West expressly disclaims any obligation to update or revise any forward-looking statements found herein to reflect any changes in the Bank's expectations of results or any change in events.
EAST WEST BANK
CONSOLIDATED BALANCE SHEETS
(unaudited)
(In thousands, except per share amounts)
December 31, December 31,
1999 1998 % Change
Assets
Cash and cash equivalents $ 43,497 $ 161,131 (73)
Investment securities 496,426 682,436 (27)
Loans (net of allowance
for loan losses of
$20,844 and $16,506) 1,486,641 1,100,579 35
Other assets 126,066 114,014 11
Total assets $ 2,152,630 $ 2,058,160 5
Liabilities and
Stockholders' Equity
Deposits $ 1,500,529 $ 1,292,937 16
Short-term borrowings 600 33,000 (98)
FHLB advances 482,000 563,000 (14)
Other liabilities 17,393 15,950 9
Total liabilities 2,000,522 1,904,887 5
Negative intangibles 2,028 2,443 (17)
Stockholders' equity 150,080 150,830 (0)
Total liabilities and
stockholders' equity $ 2,152,630 $ 2,058,160 5
Book value per share (a) $ 6.69 $ 6.34 6
Number of shares
at period end (a) 22,423 23,775 (6)
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(In thousands, except per share amounts)
For the three months
ended December 31,
1999 1998 % Change
Interest and dividend income $ 39,526 $ 35,534 11
Interest expense (19,819) (19,349) 2
Net interest income 19,707 16,185 22
Provision for loan losses (1,433) (767) 87
Net interest income
after provision for
loan losses 18,274 15,418 19
Noninterest income 3,590 2,600 38
Noninterest expense (10,475) (8,276) 27
Income before taxes 11,389 9,742 17
Income taxes (3,503) (3,247) 8
Net income $ 7,886 $ 6,495 21
Net income per share, basic (a) $ 0.35 $ 0.27 30
Net income per share, diluted (a) $ 0.35 $ 0.27 30
Cash income per share, basic (a)(b) $ 0.36 $ 0.28 29
Cash income per share, diluted (a)(b) $ 0.36 $ 0.28 29
Shares used to compute
per share net income:
- Basic (a) 22,329 23,775 (6)
- Diluted (a) 22,693 23,775 (5)
For the year ended
December 31,
1999 1998 % Change
Interest and dividend income $148,027 $126,708 17
Interest expense (76,142) (71,043) 7
Net interest income 71,885 55,665 29
Provision for loan losses (5,439) (5,356) 2
Net interest income
after provision for
loan losses 66,446 50,309 32
Noninterest income 14,693 10,027 47
Noninterest expense (39,509) (32,626) 21
Income before taxes 41,630 27,710 50
Income taxes (13,603) (9,682) 40
Net income $ 28,027 $ 18,028 55
Net income per share, basic (a) $ 1.23 $ 0.76 62
Net income per share, diluted (a) $ 1.22 $ 0.76 61
Cash income per share, basic (a)(b) $ 1.27 $ 0.78 63
Cash income per share, diluted (a)(b) $ 1.26 $ 0.78 62
Shares used to compute
per share net income:
- Basic (a) 22,757 23,775 (4)
- Diluted (a) 22,895 23,775 (4)
SELECTED FINANCIAL INFORMATION
(unaudited)
(Dollars in thousands)
Average Balances
For the three months
ended December 31,
1999 1998 % Change
Loans
Residential first mortgage $ 269,682 $ 275,230 (2)
Real estate - multifamily 309,382 159,277 94
Real estate - commercial 488,895 340,962 43
Real estate - construction 111,530 76,595 46
Commercial 140,771 91,381 54
Trade finance 101,966 112,162 (9)
Consumer 28,113 19,667 43
Total loans $ 1,450,339 $ 1,075,274 35
Investment securities 529,443 646,635 (18)
Earning assets 2,018,582 1,925,774 5
Assets 2,118,955 2,005,394 6
Deposits
Noninterest-bearing 133,610 93,659 43
Interest-bearing, core 857,837 809,410 6
Total core deposits 991,447 903,069 10
Time deposits-$100,000 and over 482,240 366,319 32
Total deposits 1,473,687 1,269,388 16
Interest-bearing liabilities 1,808,677 1,747,715 3
Stockholders' equity 148,401 147,445 1
For the year ended
December 31,
1999 1998 % Change
Loans
Residential first mortgage $ 260,206 $ 307,499 (15)
Real estate - multifamily 249,550 150,356 66
Real estate - commercial 436,585 317,210 38
Real estate - construction 98,297 46,801 110
Commercial 133,425 79,748 67
Trade finance 104,123 86,850 20
Consumer 24,120 16,013 51
Total loans $ 1,306,306 $ 1,004,477 30
Investment securities 609,587 477,338 28
Earning assets 1,985,359 1,729,067 15
Assets 2,076,544 1,800,582 15
Deposits
Noninterest-bearing 116,129 78,802 47
Interest-bearing, core 846,572 806,028 5
Total core deposits 962,701 884,830 9
Time deposits-$100,000 and over 431,401 359,513 20
Total deposits 1,394,102 1,244,343 12
Interest-bearing liabilities 1,788,855 1,567,270 14
Stockholders' equity 147,848 140,501 5
SELECTED FINANCIAL INFORMATION
(unaudited)
(Dollars in thousands)
For the For the
Three months ended Year ended
December 31, December 31,
1999 1998 %Change 1999 1998 %Change
Selected Ratios
For The Period
Return on
average assets 1.49% 1.30% 15 1.35% 1.00% 35
Return on average
equity 21.26% 17.62% 21 18.96% 12.83% 48
Interest rate spread 3.45% 2.95% 17 3.20% 2.80% 14
Net interest margin 3.91% 3.36% 16 3.62% 3.22% 12
Noninterest expense/
average assets(c) 1.71% 1.54% 11 1.68% 1.69% (1)
Efficiency ratio(c) 39.17% 41.28% (5) 40.56% 46.52% (13)
Net chargeoffs to
average loans 0.08% 0.01% 700 0.17% 0.11% 55
Period End
Tier 1 risk-based
capital ratio 9.33% 10.28% (9)
Total risk-based
capital ratio 10.58% 11.42% (7)
Tier 1 leverage ratio 7.31% 7.38% (1)
Nonperforming assets
to total assets 0.75% 0.99% (24)
Nonaccrual loans
to total loans 0.73% 0.87% (16)
Allowance for loan
losses to total loans 1.38% 1.47% (6)
Allowance for loan losses
to nonaccrual loans 190.65% 166.88% 14
Noninterest income:
Loan fees $ 737 $ 679 9 $ 2,282 $ 2,389 (4)
Branch fees 888 689 29 3,388 2,579 31
Letters of credit
fees and
commissions 1,009 920 10 4,111 2,785 48
Gain on securities 638 4 15,850 2,589 1,320 96
Gain on sale of
investments in
affordable housing
partnerships -- -- n/a 402 -- n/a
Gain on sale
of branch -- -- n/a 676 -- n/a
Amortization of
negative
intangibles 104 103 1 415 415 0
Other 214 205 4 830 539 54
Total $ 3,590 $ 2,600 38 $14,693 $10,027 47
Noninterest expense:
Compensation and
other employee
benefits $ 4,571 $ 4,141 10 $18,481 $17,281 7
Net occupancy
of premises 1,376 1,279 8 5,649 4,974 14
Deposit insurance
premiums and
regulatory
assessments 224 197 14 862 825 4
Data processing 325 292 11 1,399 1,245 12
Amortization of
positive
intangibles 453 310 46 1,572 1,241 27
OREO operations (277) (178) 56 (340) (380) (11)
Amortization of
investments in
affordable housing
partnerships 938 255 268 2,991 1,017 194
Other 2,865 1,980 45 8,895 6,423 38
Total $10,475 $ 8,276 27 $39,509 $32,626 21
(a) Per share data adjusted to reflect the 118,875 for 550,000 reverse
stock split effective June 11, 1998
(b) Excludes the amortization of intangibles
(c) Excludes the amortization of intangibles and investments in
affordable housing partnerships
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